FHA Loan Credit Score Requirements

Does Credit Affect Your Loan Options?

Your credit history matters when it comes to getting a mortgage loan. It will directly impact whether you’re approved for an FHA mortgage, and it also determines your mortgage interest rate. Lenders view borrowers with low credit scores and more recent credit problems as a higher risk of defaulting on the loan. To offset some of this risk, if your credit score is low, you'll often receive a higher interest rate. A higher mortgage rate means paying more in interest over the life of the loan, as well as a higher monthly payment - so it's important to pay attention to your credit.

662

Average credit score of today's buyers


35%

Of buyers feel their credit score is holding them back


45%

Of buyers in 2020 had credit card debt


What Is an Average FICO Score?

Your credit score is a number that falls between 300 to 850. Average credit scores vary depending on age group and the length of a person’s credit history. According to the credit reporting company Experian, consumers over the age of 60 have an average good credit score of 749. Younger borrowers between the ages of 20 and 29 have an average score of 662.


Minimum Credit Score for All Loan Types

The average credit score for a mortgage loan is around 620 to 640. Personal loans are a bit higher, with typical credit scores falling between 680 and 700.

Official HUD Guidelines for Credit Score

The U.S. Department of Housing and Urban Development (HUD), sets the guidelines for minimum qualifying credit scores, but it's important to be aware that different lenders will have their own minimum requirements that may be higher. Our minimum credit score for an FHA loan is 620. To visit the HUD website and learn more about FHA loans, click here.

The purchase price of a property determines the down payment. Mortgage insurance is required when a borrower puts down less than 20%. FHA borrowers who put down less than 10% pay mortgage insurance for the life of the loan.

Can You Get an FHA Loan with No Credit?

\What if you don't have credit? Can you still get an FHA loan? If you haven’t established credit yet, FHA lenders will sometimes allow the use of non-traditional credit to qualify for a mortgage. You'll need to show proof of on-time payments for things like utility payments, rental payments, and auto insurance payments. You'll also need to show sufficient income to qualify for an FHA home loan. Lenders require copies of tax returns, W2s, paycheck checks, and bank account statements.

Can You Get an FHA Mortgage After a Bankruptcy, Foreclosure, or Short Sale?

An FHA home loan is a good loan option if you've had some financial troubles in the past. It is easier to get approved for an FHA home loan after credit problems, compared to other loan programs. You might qualify for a loan two years after bankruptcy, three years after a foreclosure, and three years after a short sale.


FHA Lenders Look at More Than Just Your Credit Score

You're more than just your credit score! Lenders will look at a variety of information in addition to your credit score when approving an FHA mortgage application. They'll also consider your employment record, income history, and your assets. Having a stable income and sufficient cash reserves to cover your down payment and closing costs are also must-haves.


Sample Credit Report

Your credit report is like a report card for your credit history. It includes current and past creditors, what you currently owe, minimum payment amounts, and whether your accounts are in good standing or delinquent. It also includes information about collection accounts, judgments, recent foreclosures, and recent bankruptcies. Here’s a look at a sample credit report.


Tips to Increase Your Credit Score Quickly

Does a lower interest rate sound good? Of course it does! A higher credit score can help you qualify for a mortgage and get a lower interest rate. If you're looking to increase your credit score, a good place to start is by paying your bills on time, paying off credit card debt, not applying for credit unnecessarily, and checking your credit report for inaccuracies. Disputing and removing errors on your credit report can also help raise your credit score